ATLANTIC STEWARDSHIP BANK

Predictive Indicator
neutral
As of
March 31,
2016
Federal Reserve System Identifier 527507

HOLDING COMPANY INFORMATION

(Based on data from the previous quarter.)

This bank is not owned by a holding company.

INTRODUCTION

U.S. commercial banks are chartered under either federal or state jurisdiction for the purposes of accepting funds for deposit and extending loans to either individual or business borrowers. Banks are subject to credit, interest rate, and operational risk, and, because of both their public purpose and their importance to the nation’s economy, banks become the object of intense regulatory scrutiny.

U.S. thrift institutions are chartered under either federal or state jurisdiction for the primary purpose of utilizing deposited funds to issue loans secured by real estate. Currently, real estate-backed loans account for approximately 42% of total thrift industry assets, and one-to-four family residential mortgages comprise nearly 59% of the industry’s real estate loan portfolio. Thrift institutions are subject to credit, interest rate, and operational risk, and, during the last twenty years, thrifts have made great strides toward reducing historic mismatches between asset and liability maturities.

The Bankrate proprietary commercial bank rating model analyzes capitalization,
asset quality, earnings, and liquidity and produces composite and component
"Star" ratings that can be used as a measure of the rated entity's financial
safety and soundness. Additionally, early warning components of the model
highlight operating characteristics of immediate concern and recommended
follow-up actions. "The analyses are not adjusted for TARP funding and those
institutions receiving funds may receive ratings that would differ were the
TARP funds adjusted out of the analyses. You can check whether or not this
institution has received TARP funding and whether or not they have paid it
back at http://projects.propublica.org/bailout/list/index."

INSTITUTIONAL HIGHLIGHTS

Institution Name

ATLANTIC STEWARDSHIP BANK

Report Date

March 31,
2016

Report Period

3 months

Star Composite Rating, Percentile Rank

4
/36.75

Predictive Indicator

neutral

Earnings Rating, Percentile Rank

2
/38.21

Asset Quality Rating, Percentile Rank

5
/56.57

Capital Rating, Percentile Rank

3
/33.28

Liquidity Rating, Percentile Rank

3
/27.89

Institution Asset Size

724.169 million

Deposits

612.62 million

Loans

520.19 million

Equity

69.072 million

Net Profit/Loss

1.293 million

COMPONENT HIGHLIGHTS

Component star rating:
2

Earnings Highlights

Bank profitability is critical to building capital, establishing adequate loss reserves, and providing dividends to shareholders.

Key Earnings information and ratios:

Ratio (%)

Assessment

Return on Equity

7.76

Good

Net Interest Margin

3.45

Mid-Range

Level of Non-interest Income (1)

0.46

Substantially Below Normal

Overhead (1)

2.78

Below Standard

(1) = As a percentage of average assets
Note: All ratios are based on the latest four quarters of income and expense

Component star rating:
5

Asset quality highlights

Asset quality is a major determinant of the viability of any banking institution. Poor asset quality will have a very direct impact upon the other components and bank regulators invest substantial amounts of time and resources in gauging the quality of a bank's loans and investments.

Bank capitalization stands as a protection against loss for bank customers, creditors, shareholders, and the Federal Deposit Insurance Corporation (FDIC). Regulators place a high degree of importance upon assessments of capitalization and assign regulatory benchmarks as determinants of capital adequacy.

Key measures of Capital Adequacy:

Ratio (%)

Assessment

Net Worth to Total Assets

9.54

Below Peer Norm

Regulatory Capital Ratio

13.73

Exceeded Requirement

Component star rating:
3

Liquidity highlights

Liquidity provides funding for normal bank operations and represents a reserve for unanticipated disintermediation. Liquidity can be both an asset and a liability concept.

Key measures of Liquidity:

Ratio (%)

Assessment

Balance Sheet Liquidity

11.79

Substantially Below Normal

Purchased Liabilities

11.32

No Greater Than Average Dependence

Early warning highlights

Early warning indicators identify areas of potential concern, which may lead to financial deterioration and thus, require inquiry or in-depth investigation.
For this bank we have noted:

Non-Interest Income

Commercial Real Estate and Construction Lending

Capital Adequacy

Institution Commentary

OVERVIEW of Institution
Organized in 1985,
ATLANTIC STEWARDSHIP BANK, which, as of
March 31,
2016,
reported $724.169 million in total assets.
At that date, loans and deposits held by the bank amounted to
$520.19 million and $612.62 million,
respectively. The bank's
March 31,
2016
equity base of $69.072 million produced an Equity/Assets ratio of
9.54%, as of that date.

COMPOSITE SUMMARY
Bankrate believes that, as of
March 31,
2016,
this bank exhibited a sound condition, characterized by
lower than normal overall, sustainable profitability,
a very high measure of asset quality,
mid-range capitalization and
near normal liquidity.

EARNINGS ANALYSIS
For the twelve months ended
March 31,
2016,
the bank recorded net income
of $5.241 million. The bank experienced a return on average assets (ROA) of
0.74% over the latest four quarters. Year earlier
twelve month results amounted to a net income
of $4.022 million, or a
0.60%
ROA over the most recent four quarters at that time. An ROA of at least 1.0% is deemed satisfactory in accordance with banking
industry standards, and the industry's annualized ROA for the twelve months
of 2016 was approximately 0.95% for commercial banks
and 1.25% for thrift institutions.

We have concluded that for the four quarters ending
March 31,
2016,
the bank achieved a good
return on equity.
We deem net interest margin to have been mid-range.
Noninterest income was substantially below normal, and management should be questioned as to the outlook for this source of revenue.
We also observed overhead ratios that were below standard, a sign of good expense control.
Importantly, net interest margins, noninterest income components, and overhead expense levels
represent operating factors that combine to impact overall operating results.
We have also noted that the bank's profitability improvement between the
twelve months ended
March 31
,
2015 and the
twelve months ended
March 31
,
2016 well exceeded
the banking industry peer comparison.

ASSET QUALITY ANALYSIS
The bank revealed, as previously stated, a very high measure of
asset quality. Our conclusion with respect to asset quality incorporates our analysis
of data depicting regional economic conditions as well as our computations of
a relatively low
March 31,
2016 nonperforming asset ratio,
much better than normal
reserve coverage for nonperforming loans; and
apparently acceptable quality, or no greater than average,
holdings of commercial real estate and construction loans, two categories
that can intensify credit risk.

Loan-to-value benchmarks deemed not in conformance with prudent underwriting requirements.

Speculative construction activity.

The deferral of interest payments during construction periods.

The funding of the entire amount of construction costs and land valuation.

Other asset categories, such as farm and consumer loans, which may carry
more than usual default potential, should not have a substantial negative impact
upon future results.

Loan yield can measure financial reward versus credit risk. Excessive loan yield may be an
indicator of existing or future problems. Our loan review indicates that the bank has assumed a
seemingly prudent position between credit risk and financial reward.

CAPITAL ANALYSIS
For the one year period ended
March 31,
2016, the bank reported
an approximately normal rate of growth in equity capital.
Balance sheet structural changes, through the one year period of time ended
March 31,
2016, have
improved
the bank's capital position. Our analytical methodology does take into account the quantity,
quality, and durability of net worth, and, as set forth above, we have determined, based upon
our series of tests, that the bank demonstrates
mid-range
capitalization. We have calculated the bank's
March 31,
2016
Total Risk-Based Capital position, a computation used by industry regulators, and have concluded
that this bank exceeded
the requirement, set by regulation, for this test.
Notwithstanding any of the information contained within this section, we believe, based
upon our analysis of net worth to total assets, that the institution should consider plans for enhancing reported
capitalization.

LIQUIDITY ANALYSIS
As of
March 31,
2016, the bank displayed
Substantially Below Normal
balance sheet liquidity and a
No Greater Than Average Dependence
upon wholesale, or non-core liabilities, which include all borrowings, such as Federal Home
Loan Bank Advances, and CD's greater than $250,000.

Accounting principles require some securities to be categorized as "Available-for-Sale."
Changes in market value of these securities are reflected through the GAAP (Generally
Accepted Accounting Principles) net worth of the institution. Based upon the bank's
present balance sheet, changes in the value of the current level of securities reported
as "Available-for-Sale"
could have a substantial impact
upon future net worth of the bank.

PREDICTIVE INDICATOR
As stated, we have determined a composite Star rating for this bank of
4
, indicative of a
sound
financial condition. At times, financial conditions of banks change rapidly and significantly.
Hence, our Safe & Sound Star ratings should not be deemed predictive of likely future ratings.
However, in view of early warning indicators set forth within this report, in combination with
the institution's financial data, we believe that the Star rating for this institution is
unlikely to change
within the ensuing twelve month period.

Rating is for the quarter ending 03-31-2016; amended filings not reflected

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